White House allows encryption sales

Posted: Friday, September 17, 1999

By Ted BridisAssociated Press

WASHINGTON -- The White House agreed Thursday to allow U.S. companies to sell the most powerful data-scrambling technology overseas with virtually no restrictions, a concession to America's high-tech industry over law enforcement and national security objections.

The move was a defeat for the Justice Department, which had forcefully argued that criminals and terrorists might use the technology to scramble messages about crimes or deadly plots.

Even as the new policy was announced, Attorney General Janet Reno said at the White House, ''In stopping a terrorist attack or seeking to recover a kidnapped child, encountering encryption might mean the difference between success and catastrophic failure.'' She said the policy ''will mean that more terrorists and criminals will use encryption.''

To help law enforcement, the White House will urge Congress to give the FBI $80 million over four years to develop techniques to break messages scrambled by terrorists.

The decision should help U.S. companies in overseas competition -- and help consumers worldwide guarantee the privacy of their e-mail and online credit-card purchases. Although Reno described dire consequences of criminals using encryption, she readily acknowledged the technology ''is critically important for protecting our privacy and our security, and the administration.''

The White House's announcement comes as Vice President Al Gore, a self-described technology buff, courts the favor of the booming high-tech industry during his presidential campaign.

''This decision by the vice president, who was really leading this effort, now is consistent with the views of virtually everyone in the technology community,'' said Robert Holleyman, executive director of the Business Software Alliance.

Critics of restrictions on export sales said criminals and terrorists already could buy or download powerful encryption technology made in other countries.

''Those who are going to misuse encryption for criminal purchases aren't going to limit themselves to U.S.-made encryption products,'' said Ed Gillespie, executive director of Americans for Computer Privacy.

The administration will allow high-tech companies to sell even the most powerful encryption technology overseas to private and commercial customers after a one-time technical review of their products.

''A company (wanting approval) will need to come in with more than a brochure,'' Deputy Defense Secretary John Hamre said.

Reno said ''I'm obviously not going to tell you'' whether the FBI already can decode messages scrambled using the newly permitted encryption strengths.

''We are going to have a very significant research and development program in the months ahead of us,'' Hamre said. ''This is a complex environment, it's going to change every day and it's going to take us a fair amount of effort to stay ahead of the problem.''

The White House will still require companies to seek permission to sell the scrambling technology to a foreign government or military -- a condition Hamre said the Defense Department insisted upon -- and it maintains bans on selling to seven nations accused of terrorism: Iran, Iraq, Libya, Syria, Sudan, North Korea and Cuba.

Previously, the administration allowed companies to sell the most powerful scrambling technology only to specific industries overseas; other foreign customers were generally limited to so-called 56-bit encryption products, meaning those with 72-quadrillion unlocking combinations.

''This is a sweeping reform,'' said Dan Scheinman, senior vice president of legal and government affairs at Cisco Systems Inc. ''Imagine you're banking online -- you want to make sure those things are safe from a hacker. You buy things, you want to make sure your credit card is secure.''

The export limits never directly affected Americans, who are legally free to use encryption technology of any strength. But U.S. companies have been reluctant to develop one version of their technology for domestic use and a weaker overseas version, so they typically sell only the most powerful type that's legal for export, even to Americans.

''Forcing U.S. companies to do business under tight export controls was like asking them to use a black rotary telephone in a cellular, call-waiting world,'' said Harris Miller, president of the Information Technology Association of America, a trade group.

Critics cited more than 800 products available worldwide with stronger scrambling technology than the United States allowed its companies to sell overseas.

''You can pull it down over the Internet in less than 20 minutes,'' said Gillespie. ''Having Japanese and German and Irish companies be at the forefront of this technology is not in our best interests.''

A non-profit group of researchers demonstrated last summer it can unscramble a 56-bit coded message in just days using a custom-built computer worth less than $250,000.

The White House announcement follows its decision exactly one year ago to relax export restrictions. At the time, Gore promised the administration would reconsider its limits within the year.